Two types of coverage can protect you from the unexpected after buying a home. Home policies, which cover you for vandalism, theft and certain disasters, and a real estate guarantee plan, which pays for certain items in your home if they are broken. Home policies are required when you have a mortgage and it is an essential protection for any owner. It allows you to rebuild if a storm or fire destroys your greatest asset. A real estate guarantee is not a necessity, but it is practical and helps you save money when things start to deteriorate in the house.
Home Policy: Why You Need It
Your mortgage lender or bank has a great financial interest in the state of your home. Bad weather, a robbery or a large pipe explosion can have a devastating effect on the condition of your home, its value and, in turn, the bank’s investment in your property. To protect your interests, the bank requires you to hire a minimum home policy when you mortgage your home. The part of the home policy that worries your lender is “risk” coverage. “Home” and “risk” policies are often used interchangeably to describe this type of insurance coverage.
Your lender periodically reviews your home policy to make sure it is up to date and sufficient. Your lender can not only force you to buy a home policy, but can also buy one for you if you let yours expire. This forced home policy is often the result of failed attempts by the lender to pay your insurance on term. This forced policy may result in an additional monthly payment that is added to your mortgage to cover the cost of the new policy.
Mortgage lenders have good arguments for demanding home insurance, but having a mortgage is not the only reason to get this coverage. Even if you own your home, you may not have the funds – or you would not want to use your own funds – to rebuild your home or cover any other loss your house suffers in a catastrophic event. Even the most modest homes would cost several tens of thousands of dollars to rebuild from the beginning if they get lost in a fire. In addition, your other belongings would also need to be replaced, which makes the policy for the home. A lender requires that you insure your home based on the cost of its replacement or based on the cost to rebuild it. This is a good general rule to follow even if your home is not mortgaged.
A coverage that is often overlooked and that is included in a home policy is civil liability insurance. The liability coverage covers your legal fees and the cost of an agreement if someone is injured on your property and sued you. It can also extend beyond your property and can cover you if you are sued for something that happens outside your home.
Real estate guarantee: why would you want it?
You may not need a real estate guarantee if you are exceptionally skilled or if you have a list of merchants who have tried and proven that they charge only a small flat rate at a time. Otherwise, buying a real estate guarantee every year makes perfect sense. A real estate guarantee charges an annual fee plus a nominal service charge or “business call” each time it is paid to fix something in your home.
One of the main benefits of having a real estate guarantee is the money you save. A basic plan costs US $ 300 and can cost up to US $ 600 for higher plans. A commercial call fee may vary between US $ 40 and US $ 70. The annual cost of a real estate warranty plan is generally less than the cost of replacing a main household appliance such as the kitchen, dishwasher, refrigerator, washer or dryer. With a real estate warranty plan, all your appliances could break down in the same year and be repaired or replaced for less than the cost of buying a single new appliance.
A real estate guarantee plan also saves a lot of time. Your real estate guarantee provider hires local merchants who have already been examined. The real estate warranty company is responsible for sending them to your home and coordinating the repair or replacement of your damaged component. The plumber, the electrician, the roofer or the technician simply evaluates the problem and informs the real estate warranty company. Next, the company determines whether the damaged item should be fixed or replaced. You pay for a real estate guarantee when you buy a house, but you can also buy a plan at any time. If you wish, you can renew the real estate guarantee plan every year.
Many homebuyers can request that the seller pay for a one-year real estate warranty plan at the time of closing the security deposit. Some real estate agents may even offer to pay for the plan if a seller or buyer will not. This adds additional protection and peace of mind, especially for new homebuyers who don’t know what awaits them in terms of the condition of their new home.
A seller, likewise, can also buy a real estate guarantee plan when selling a house, if you don’t have one already. A seller’s real estate warranty plan can cover the necessary repairs during the listing period or when a home is under warranty. This coverage could be of interest to a seller who wants to assure the buyer that a house is in good condition and provide a guarantee for any work done to the house while it is in the market.
Whether you are buying a home policy or a real estate guarantee plan, the cost varies depending on:
- The state or location
- The type of property
- The size, usually in square meters
- The insurance or guarantee company
Higher or “enhanced” real estate warranty plans can cost approximately US $ 100 to US $ 300 more than a standard home warranty. While a standard real estate warranty usually covers built-in appliances such as a kitchen, dishwasher and microwave; Other appliances, such as a refrigerator, washer or dryer are considered upgrades and added to the cost. A standard plan generally covers plumbing, water heater, oven, electrical and mechanical components, ceiling fans and extractors. But coverage for a pool or spa, roof repairs, air conditioning and septic systems are typically improvements and cost more money.
The national average cost for a home insurance premium was US $ 1,228 for a home of US $ 200,000 with a deductible of US $ 1,000 and US $ 100,000 in civil liability coverage, at the time of publication of this article. States that are prone to hurricanes, hail storms, tornadoes and earthquakes have the highest insurance rates. For example, Florida and Louisiana were the most expensive, while Hawaii and Vermont were the least expensive, according to an Insurance.com survey. There are also other variables that do not affect real estate guarantee plans, but home insurance premiums, such as:
- House age
- Construction materials
- Security systems
- Area crime rates
- Homeowner’s credit rating
- Claim History
A standard home policy does not cover earthquakes or even floods when it is due to inclement weather. Earthquake and flood insurance is an additional policy, or “additional clause,” that you can buy. Depending on where you live, this complement can be of the utmost importance.